Bharat Financial Inclusion

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Bharat Financial Inclusion Ltd
Industry Finance
Founded 1998
Headquarters Hyderabad, India
Area served
Key people
Vikram Akula - Founder,
M. R. Rao - CEO
Number of employees
9,698 (2015)[1]

Bharat Financial Inclusion Limited (formerly known as SKS Microfinance Limited) BFIL is a non-banking finance company (NBFC), licensed by the Reserve Bank of India. It was founded in 1997 by Vikram Akula, who served as its executive chair until November 2011.[2] The company's mission is to provide financial services to the poor under the premise that providing financial services to poor borrowers helps to alleviate poverty.[3][4] In 2013, the company operated across 17 Indian states.[5]


In an early interview at Wharton in 2008, Akula recounted having worked with an NGO in India as a loan officer on the field in 1997.[6] The potential for impact that these loans had given him the idea of setting up SKS as a more scaled up version for micro finance. He formed it as a charity in 1998 in Hyderabad, India as a part of his PhD studies to explore the then non existent micro finance industry in India. Though claimed to be based on the Grameen bank model, SKS granted high interest (36%) loans of Rs. 10,000 to R. 2 lakh to men and women in Andhra Pradesh belonging to poor families (as compared to Grameen bank which grants income producing loans at 20% APR.[7][8] However, unlike Grameen bank, SKS used an aggressive commission based system to encourage loans, thus forming a network of loan marketers who were not direct employees of SKS, but worked on a commission basis in smaller villages of Andhra Pradesh. SKS used a network of loan sharks to pursue matters with defaulters.[9]

Meanwhile, Akula got married and his wife Malini Byanna, a lawyer by profession was appointed director of some of the organisations of SKS. By this time, SKS had four major arms - SKS Foundation, SKS Education, SKS Microfinance and SKS Technologies. The foundation was subsequently able to receive grants from Indian and foreign institutions, mainly for their education related charity.[10]

2005 to 2010[edit]

In 2005, SKS went public and simultaneously began to pursue more aggressive means of granting loans as well as reclaiming them. This led to unethical practices by its loan sharks, leading to a number of suicides of defaulters. On 28 July 2010, SKS Microfinance debuted on the Bombay Stock Exchange with an IPO that was oversubscribed 14 times. Muhammad Yunus expressed concern that going public would put the demands of shareholders ahead of the poor.[11] He added further, "If they do it, I cannot stop them but I would encourage genuine Microcredit programs."[12] Akula countered that the legal frameworks in Bangladesh and India were different, stating that Grameen Bank in Bangladesh was funded primarily by deposits raised from its own borrowers and non-members, whereas Indian MFIs were prohibited by law from collecting deposits.[13] The CFO Suresh Gurumani was subsequently sacked from SKS for unexplained reasons.

In a 2012 cover story, The Hindu[9] reported that a marked shift took place in the values and incentives of SKS in 2008, after largescale investment began to flow in from venture capitalists and prospectors including Boston based Sandstone capital and Sequoia capital. In September 2010, reports surfaced in the media of nearly 200 suicides by defaulters of a number of micro finance institutions, including SKS finance. This led to an enquiry by the Andhra Pradesh government. In September 2001, Akula's wife applied for a divorce from her husband and a request to the board to separate out the various organisations functioning under the SKS umbrella. In a 2011 interview with The Economic Times, Byanna stated that she was often asked by Akula to sign on fraudulent papers, and funds were often transferred by Akula from specific SKS education projects and grants to SKS microfinance without informing the board. She requested that she be given control and management of the SKS Foundation and Education, and Akula remain the chairman of SKS Microfinance and SKS Technologies. The request was denied, resulting in her resigning from SKS altogether.

SKS founder Vikram Akula resigned from the board on 23 November 2011. In 2015, P. H. Ravi Kumar became the non-executive chairman.[14] The Company subsequently entered into an agreement with IndusInd Bank regarding a potential merger via share swap. The company's shares meanwhile lost 90% of their value from a high of Rs. 1304 in 2010.[15]

MFI Crisis in India in 2011[edit]

In 2011, the micro finance industry (MFI) in India suffered a crisis due to the growing news of suicides by borrowers, and SKS to faced the brunt. In 2012, an independent investigation commissioned by the company linked SKS employees to at least seven suicides of creditors in Andhra Pradesh. A second investigation said SKS may have been involved in two other suicide cases.[16] In 2012, SKS Microfinance cut 1200 jobs and closed 78 branches in Andhra Pradesh.[17] Interviews with family members of the deceased, by BBC suggested that the reason for these suicides appeared to be large sub-prime loans taken by the villagers, with the active encouragement of SKS loan agents.[18]


SKS Microfinance offers life assurance and a variety of financial loans – Income Generation Loans; Mid-Term Loans; Long Term Loans; Loans for purchase of products like cook-stoves, solar lights, water purifiers, mobile phones, bicycles and sewing machines; and loans secured on gold jewellery.[19] The company lists some of the social benefits of its financial product and service offerings as "providing self-employed women financial assistance to support their business with enterprises, such as raising livestock, running local retail shops called kirana stores, providing tailoring and other assorted trade and services."[19] Loans were subsequently also offered to men, and for various reasons including marriage expenses and to purchase seeds.[9]


SKS Microfinance follows the Joint Liability Group (JLG) model. The methodology involves lending to individual women, using five– member groups as the ultimate guarantor for each member.[20] Through group lending, situations of adverse selection and moral hazard due to asymmetric information are better managed.[21] "Social collateral" replaces asset collateral (which is lacking in the poorer segments of society). Such a system works because India is still a highly community-centric society. The concept of honour and respect within society is deeply rooted in Indian culture and willful default invites condescending glances, humiliation and even ostracism.[22] In Nov 2015,SKS Microfinance Ltd has cut interest rates by one percentage point to 19.75% on the loans it offers to low-income women borrowers, making it the sole Indian microlender to offer loans at a rate below 20%.The move came after Reserve Bank of India (RBI) decided to double the borrower limit for microfinance loans for less than 24 months.Lower interest rates can attract more borrowers in an increasingly competitive market. Microfinance companies, which had started lending at around 28-34% in 2010, are now able to charge lower interest rates because of newer avenues to raise funds at lower cost and their ability to operate more efficiently than before.“SKS is the first company to charge sub-20% interest rates on the core income generating loans,” the company claimed in a statement on Friday. This is the fourth time SKS has reduced interest rates since October 2014.[23]


  1. ^ SKS Earnings Update Q4FY15
  2. ^ "Vikram Akula quits SKS". The Hindu. Chennai, India. 23 November 2011. 
  3. ^ "SKS: Know SKS: Our Approach". Archived from the original on 2012-05-13. Retrieved 2012-07-17. 
  4. ^ The Microfinance Promise. Jonathan Murdoch, JSTOR
  5. ^ SKS Microfinance concludes two securitisation transactions Business Standard. April 1, 2013
  6. ^ "SKS Microfinance's Vikram Akula on mobile banking (1 May 2008)". Knowledge at Wharton. 
  7. ^ "Grameen bank - interest rates". Grameen bank. Retrieved 12 January 2018. 
  8. ^ Akula, Vikram (1 November 2010). A fistful of rice : My Unexpected Quest to End Poverty Through Profitability. Harvard Business Review Press. ISBN 1422131173. 
  9. ^ a b c Kinetz, Erika (25 February 2012). "Small loans add upto lethal debts". The Hindu. Retrieved 12 January 2018. 
  10. ^ Mitra, Avishek (25 October 2010). "'Vikram Akula made me do illegal things' - An interview with Malini Byanna". The Economic Times. Retrieved 12 January 2018. 
  11. ^ "Archived copy". Archived from the original on 2015-06-23. Retrieved 2011-03-10.  ABCNews, SKS Launches India's First Microfinance IPO
  12. ^ "Archived copy". Archived from the original on 2011-08-29. Retrieved 2011-09-19.  Microfinance Focus, "Microfinance pioneer Prof Yunus raises concern over SKS IPO,"
  13. ^ "Archived copy". Archived from the original on 2011-09-26. Retrieved 2011-09-19.  Microfinance Focus, "Exclusive: SKS Microfinance journey to IPO – An inside story,"
  14. ^ Care Ratings - SKS Microfinance Limited. April 6, 2015
  15. ^ "Boss of Indian microfinance firm SKS steps down". BBC. 24 November 2011. Retrieved 12 January 2018. 
  16. ^ Kinetz, Erika. "AP IMPACT: Indian lender SKS' own probe links it to borrower suicides, despite company denials". Associated Press Business Writer. Associated Press/Yahoo. Retrieved 25 February 2012. 
  17. ^ "SKS Microfinance cut 1,200 jobs in Andhra Pradesh". The Times Of India. Retrieved 10 May 2012. 
  18. ^ Morris, Madeline. "'India's Microfinance Meltdown' for BBC Newsnight". You Tube. BBC. Retrieved 23 July 2015. 
  19. ^ a b "SKS: Our Work: What We Do: Our Products". Retrieved 7 February 2016. 
  20. ^ "SKS: Know SKS: Our Approach: Methodology". Archived from the original on 2012-05-13. Retrieved 2012-07-17. 
  21. ^ [1] Prabal Roy Chowdhury, "Group-lending with sequential financing, joint liability and social capital,"
  22. ^ Eric Savage, Abhijit Ray & Abhishek Fogla, "Indian Microfinance: Swimming Fully Clothed!," "Archived copy" (PDF). Archived from the original (PDF) on 2012-03-21. Retrieved 2011-09-19. 
  23. ^

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